E.ON became the first big British energy supplier on Wednesday to announce household gas price cuts this winter in the wake of a fall in wholesale prices, putting pressure on other companies to follow suit.
E.ON said it would cut its standard residential gas price by an average of 5.1 percent from Feb. 1. This is equivalent to three weeks’ gas use, or 32 pounds ($45) off an average annual gas bill.
Wholesale gas prices are hovering around their lowest levels since 2009 due to an over-supplied market, above-average winter temperatures which have dampened demand and falling commodity prices.
Pressure has been mounting on the UK’s ‘big six’ energy suppliers – SSE, Iberdrola’s Scottish Power, Centrica, RWE npower, E.ON and EDF Energy – to cut prices to consumers but the last reduction in retail gas prices was made last August by Centrica’s British Gas arm.
However, E.ON was also first to cut gas prices in January last year, with a 3.5 percent reduction.
UK regulator the Competition and Market Authority is expected to report its findings from an investigation into the country’s largest energy suppliers at the end of this month.
Around half of the average British household energy bill is based on market prices for electricity and gas, while the rest is composed of, among other things, distribution costs and subsidies for vulnerable customers and for renewable energy production.
“While the price we pay for our customers’ energy has fallen, we also have to take account of managing the various other risks in the market which can change, and the fact that many of the other costs that we don’t control but do have to bear have increased or may increase,” Tony Cocker, chief executive of E.ON UK, said in a statement.
Even though wholesale gas price movements could translate into a price drop of below 10 percent for a dual-fuel domestic bill, these other factors are also taken into account in the cut E.ON has announced today, he added.
“We will continue to keep all these factors under review,” Cocker said.
In addition, E.ON launched on Wednesday a new price which it says is the cheapest available energy tariff in Britain – a one-year dual-fuel fixed-price product which is available to new and existing customers.
It also launched two new versions of other dual-fuel tariffs which are now priced lower than previously.
